California Statewide: Owner/Borrower FAQs


California Statewide: Owner/Borrower FAQs

How long does it take to obtain approval for a 504 loan?
A lot depends on the borrower. With complete information and documents, we can put together the loan package relatively quickly. The timing often depends on obtaining the appraisal and environmental reports as early as possible. California Statewide cares about your project and will seek to understand your timing needs and expectations. We consistently meet the demands of 45 to 60-day escrows. In any event, SBA loans do not take longer to close than conventional loans.
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What is the minimum down payment required?
A minimum down payment of 10% is required for most 504 projects. However, a 15% down payment is necessary when a business is a start-up enterprise (less than 2 years old) or when the project property is considered special-purpose. A 20% down payment is required in situations involving both a start-up business and a special-purpose property.
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How much does a 504 loan cost?
When your SBA 504 loan is funded, you will incur origination fees totaling approximately 2.15% of your net debenture amount, plus an attorney closing fee of $2,300. These fees are included in the principal amount and financed over the term of the loan (i.e. they are not out-of-pocket expenses). SBA loan fees are determined by SBA regulation and are needed to cover the cost of administering the loan program.
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What will be my interest rate on the 504 loan?
The interest rate on the SBA 504 loan will be determined at the time the 504 debenture pool is sold to the private market. The effective rate (which includes all ongoing fees) for a 20-year SBA 504 Loan incorporates the 10-year Treasury bill rate (5-year Treasury for a 10-year SBA 504 Loan) when the debenture is sold. Because SBA 504 Loans are all funded using the same market sale process, interest rates are the same, regardless of CDC (Certified Development Company). California Statewide CDC always quotes the full term effective interest rate.
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Is there a fee if I prepay my loan?
Yes. This SBA requirement exists in order to keep whole the market investors that provide funds for the loans. However, the amount of the prepayment fee decreases each year and disappears after year five for a 504 loan with a 10-year maturity and after year 10 for a 504 loan with a 20-year maturity. The formula for calculating the prepayment fee on a 20-year 504 loan is as follows:
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Prepayment Fee = D (I x P), where
D = the remaining principal balance of the Debenture
I = the interest rate stated on the face of the Debenture expressed in decimal points (“cost of funds”)
P = the factor set forth below for the applicable year:

Year P
1 1.00
2 .90
3 .80
4 .70
5 .60
6 .50
7 .40
8 .30
9 .20
10 .10
11 and thereafter 0

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Can I personally hold title to Project Property and lease it to my business?
Yes. SBA allows for individuals, trusts, LLCs, corporations or partnerships to hold title to the Project Property so long as it is 100% leased to the small business.
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Will I need to personally guarantee the SBA 504 loan?
SBA requires guarantees from all individuals and legal entities that hold a 20% or more ownership interest in either the Project Property or the Operating Company.
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Will I need to pledge my home as additional collateral?
No. In the majority of projects, the Project Property will be the sole collateral securing an SBA 504 loan. Additional collateral is only required when there is a deficiency in the appraised value of the Project Property or is a mitigant to credit risk.
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Is my SBA 504 loan assumable?
Yes, after the loan has aged four years and under certain conditions. The assuming borrower must be a small business as well and meet credit and eligibility requirements in the same fashion as the original borrower. Call us, and we will be happy to discuss specific eligibility and requirements.
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Can I get a second SBA 504 loan?
Yes, and you can even have three or four. The amount of your total SBA indebtedness is the limiting factor, not the number of SBA loans. For non-manufacturing clients, the aggregate SBA indebtedness may not exceed $5.0 million. For manufacturing clients, the limit is $5.5 milllion and, unlike non-manufacturing clients, is applied on a per project basis. Please contact your California Statewide CDC representative for further information.
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Current Borrower FAQs

How can I find my current loan balance?
If you still have the amortization schedule provided at loan closing, you can look at that document to determine your current balance. If you can’t find the schedule, give us a call at (800) 348-6258 and we can give you the current balance and either fax or e-mail a copy of your amortization schedule.
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Can I refinance my SBA 504 loan?
No. Refinancing an SBA 504 loan is prohibited by statute. Your loan can, however, be prepaid through private lender financing.
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Can I pay off my SBA 504 Loan early?
Yes, "prepayment" of your entire SBA 504 Loan balance is possible. (No advance payments or partial payoffs are permitted, however). As SBA is not a conventional bank, there are special procedures and deadlines to follow to pay off your loan.

  • SBA's fiscal agent, Wells Fargo Corporate Trust Services, which also processes your loan payments, handles loan prepayments. However, your contact is still with California Statewide, as our job is to assist you through the prepayment process with Wells Fargo Corporate Trust Services.
  • During the first half of your loan’s term (first 10 years of a 20-year loan, first 5 years of a 10-year loan) your loan carries a gradually reduced prepayment fee the amount of which is tied to your loan balance and interest rate. (California Statewide provides you with a schedule of your loan's prepayment fee at loan closing, but can fax and email a copy anytime at your request).
  • Wells Fargo Corporate Trust Services schedules loan prepayments for SBA 504 loan on the third Thursday of every month, only. California Statewide can provide you with an estimate of your loan's payoff amount for any month, along with prepayment instructions and schedules.

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How do I pay off my SBA 504 loan?

  • Submit a written request to California Statewide CDC with your SBA loan number and the month that you wish to pay off your SBA loan. California Statewide must receive your request eight days prior to an established prepayment date.
  • California Statewide receives the final payoff amount from Wells Fargo Corporate Trust Services. five business days before the prepayment date. We will provide you the payoff amount and wiring instructions; you may wire the payoff funds at any time, as long as Wells Fargo Corporate Trust Services. receives the wire by NOON of the payoff date, Eastern Standard Time.
  • Throughout the process, California Statewide keeps all parties up to date on prepayment status. After your loan is paid off, we oversee the recording, release, and return of specific loan documents in a timely manner.

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What are the annual reporting requirements for my SBA 504 loan?

  • Provide evidence of hazard insurance on the project property securing the 504 loan, at the full California Statewide Certified Development Corporation named as a mortgagee and LOSS PAYEE, and a 438 BFU / CP 12 18 endorsement attached.
  • Provide annual business tax returns and/or financial statements no later than three months after your fiscal year ends. If your financial information is not available, please call us at (800) 348-6258.
  • When the loan reaches its two-year anniversary, provide current information on the number of employees (full-time-equivalent) at your company (this is a one-time request).

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